We recently compiled a list of the 15 Stocks Targeted By Activist Hedge Funds. In this article, we are going to take a look at where BP p.l.c. (NYSE:BP) stands against the other stocks targeted by activist hedge funds.
Shareholder activism continued at a record pace in 2024 as activist hedge funds pushed for strategic changes in various companies to unlock hidden value. In the first nine months of the year, 184 activist hedge fund campaigns were up and running, 26% above the four-year average. The surge came as new activists joined the fray and spearheaded 22% of the campaigns.
Why Was Shareholder Activism on The Rise?
A number of factors can be emphasized. One is the global economy cooling down. Although the US economy appeared to be on track to a soft landing, as many experts had predicted, economic growth remained timid, and other nations like Germany were on the verge of going into recession.
The rise of so-called ESG investing is another factor contributing to increased shareholder activism. Environmental, social, and governance, or ESG, is a relatively recent trend in which investors purchase stock in a company for its intrinsic value and because it performs well on ESG metrics. Some activist investors have positioned themselves as ESG-focused in the midst of this trend.
READ ALSO: 10 Best Penny Stocks to Buy for 2025 and 10 Best Stocks to Buy According to Billionaire D.E. Shaw.
Nevertheless, only 30% of the top ten activist investors accounted for the total campaigns in 2024, down from 46% in the same period in 2023. On the other hand, most of the campaigns were less successful in breaking into company boardrooms as management fought back.
Management pushed back on several campaigns even as activist hedge funds were forced to settle on management changes. Additionally, as investors’ newfound freedom to choose between management and dissident slates makes it easier to get representation on boards, the universal proxy card continues to lead to more settlements between activists and businesses.
Even though winning board seats isn’t the main goal of every campaign, the quantity of victories indicates how well businesses are defending themselves. Dissidents won 74 seats in the first half, compared to 93 in the same period in 2023. Activists only secured 11% of the seats they were vying for in US proxy elections, compared to 65% in 2023.
Similarly, a push for company sales by activist hedge funds hit a snag as buyouts throughout the year were scarce owing to the high interest rate environment. High interest rates made it difficult for companies to access cheap capital that they could use to complete acquisitions.
According to Jim Rossman, head of the Barclays advisory group, there hasn’t been much merger and acquisition activity in the past two years. The activists’ preferred method of obtaining value from a company’s stock is weakened as a result. The most frequent demand of activists is still M&A, but they are now more focused on altering a company’s board and management.
“Activism has become increasingly sophisticated as a tactic,” says Rossman, who sees firms hiring bankers, lawyers and private equity veterans. “There’s a greater depth of understanding on how to unlock value in companies.”
As corporate board nominations open in the new year, the pace of activism is expected to increase in the upcoming months. According to Rossman, activist demands for M&A may resurface in 2025 as private equity firms look to use their growing cash and their current holdings.
Activist hedge funds typically have minority, long interests in underperforming businesses that have significant potential for value development. Since value investors make up the majority of activist investors, they must first find undervalued companies.
Our Methodology
To make our list of stocks targeted by activist hedge funds, we looked for companies that made the headlines in the context of renowned activist investors taking a position. We then ranked these companies based on their latest market capitalization.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A large turbine generating power from natural gas, smoke rising in the background.
BP p.l.c. (NYSE:BP)
Company Market Cap as of December 31: $79.81 Billion
Number of Hedge Fund Holders: 36
BP p.l.c. (NYSE:BP) is an energy company that provides carbon products and services. It engages in the production of natural gas and integrated gas, as well as hydrogen and carbon capture and storage facilities. While the stock was down by about 16% in 2024, the underperformance was mostly fuelled by a slump in oil prices.
Amid the underperformance, it was one of the stocks targeted by activist hedge funds aggrieved by the company’s new strategy. BP p.l.c. (NYSE:BP) launched a high-profile push into renewable energy as it sought to cut its oil and gas output by 40% by 2030. Nevertheless, the push has turned out to be a big disappointment, with some of BP’s renewable investments generating disappointing returns.
Likewise, UK activist investor Bluebell Capital partners launched a campaign to have the company exit its renewable energy strategy. The activist investor started pushing the company to remove its chairman and lead independent director as part of its activist campaign.
BP p.l.c. (NYSE:BP) renounced its goal of reducing its oil and gas production by 2030 to win back investor trust. New CEO Murray Auchincloss also curtailed the company’s energy transition. The London-based business also retracted its plans for offshore wind in the United States, which led to significant impairments. Bluebell criticized recent earnings downgrades and questioned the company’s plans for solar expansion goals.
Overall BP ranks 5th on our list of the stocks targeted by activist hedge funds. While we acknowledge the potential of BP as an investment, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than BP but that trades at less than 5 times its earnings check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
